USTR looks for ways to keep NAFTA trade cases fresh

With help from Megan Cassella, Helena Bottemiller Evich and Anthony Adragna

USTR GOES TO BAT FOR SOUTHEAST GROWERS IN NAFTA ROUND ONE: U.S. trade negotiators are planning to put forth a proposal aimed at making it easier for produce growers to bring anti-dumping cases against Mexico — something that’s sure to please Southeast growers but also renew worries about the Trump administration's protectionist bent.

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The U.S. is expected to introduce language Saturday that would essentially make it easier for fruit and vegetable growers to make their case that Mexico is selling produce in the U.S. at below-market prices by allowing growers to use both use seasonal data and band together regionally to bring an anti-dumping case, said Joel Nelsen, who heads the key USDA advisory committee that crafted the recommendation.

Fruit and veggie wrench: The move marks a significant departure from current trade law, which requires the majority of the national industry to prove injury based on at least three years of data, and could face pushback from powerhouse growers in Western states that have cross-border operations.

Ripple effect: There are plenty of interests opposed to such a move because it could unleash unintended consequences. Lance Jungmeyer, president of the Fresh Produce Association of the Americas, which represents Mexican growers and advocates for free trade for produce across North America, likened the proposal to “Pandora’s box.”

“If Florida does it, if the tomato growers in the Carolinas do it, if the New Jersey growers do it, then you’ve created essentially a year-round tariff," he said.

Jungmeyer said such a move would undoubtedly have a ripple effect across the industry. "If this proposal were agreed to by all three countries, you would have the apple growers in Chihuahua, Mexico, as well as in British Columbia, Canada, saying, ‘Well, gosh, I want to have my own window, I want to keep out the apples from Washington state, or from Michigan, or New York.”

IT’S TUESDAY, AUG. 15! Welcome to Morning Trade, where your host is wondering if there’s still time to get viewing glasses for the upcoming solar eclipse. Got any out of this world trade news to share? Let me know: abehsudi@politico.com or @abehsudi.

** A message from ACTION for Trade: As trade deals are modernized, it’s critical for U.S. trade negotiators to make sure those deals foster the growing contributions of creativity and innovation-based industries and protect intellectual property. ACTION for Trade takes that message to Capitol Hill today. Learn more: http://actionfortrade.org/ **

TRUMP’S CHINA FIRE DOWN TO A SLOW BURN: Rather than ordering immediate tariffs or taking other moves that could violate WTO rules, President Donald Trump signed an executive memorandum directing U.S. Trade Representative Robert Lighthizer to “consider all available options” to pressure China to change course on policies that have forced American companies to hand over valuable technology to do business in the world’s second-largest economy. That includes a potential investigation under the little-used and obscure Section 301 of the 1974 Trade Act — a step that could take as long as a year before any action is taken.

The move could buy Trump some time to find ways to pressure China to use its influence over North Korea to get Pyongyang to scale back its nuclear ambitions. That could have been why Trump interrupted his vacation Monday to return to Washington to make the announcement before the cameras when he could’ve just quietly directed Lighthizer to explore options. “This is just the beginning,” Trump said ominously after signing the memorandum.

“The positive thing that the administration did, is they didn’t jump the gun,” Derek Scissors, a China policy expert at the American Enterprise Institute, said. “They didn’t say, ‘We know the Chinese are guilty.'" Rather, Scissors notes, administration officials "know they have to document it.” Doug Palmer has the story here.

FREELAND: DRAMA INEVITABLE IN NAFTA TALKS: Canadian Foreign Minister Chrystia Freeland heads to Washington this week having shared some of her government’s objectives for the talks and red lines. That includes the threat of walking from the negotiating table if the U.S. refuses to continue a dispute settlement mechanism that allows a NAFTA member to dispute a trade remedy finding. She also said Ottawa will put up a firm defense of the country’s supply management program in its dairy and poultry sectors.

"I think we do all need to be prepared for some moments of drama, that's going to be inevitable, and, as I also said, that happens in all trade negotiations," she said after a speech Monday at the University of Ottawa.

Canada will also push the U.S. for more access to government procurement. Freeland called local content requirements in procurement, in general,“political junk food — superficially appetizing, but unhealthy in the long run."

Freeland added that Canada wants NAFTA to improve provisions that ease the movement of skilled workers across the U.S.-Canada border. The demand is in line with a desire by businesses on both sides of the border to expand the pool of occupations eligible for special work visas. However, members of Congress have already made clear their distaste over any effort to expand those provisions.

FREELAND ON SUPPLY MANAGEMENT: THOSE WHO LIVE IN GLASS HOUSES ... : Canada has one message when it comes to pressure the U.S. might put on its supply management system: Look in the mirror.

“Dairy producers in the U.S. are beneficiaries of an extensive web of government supports, that is the reality as well,” she said during a hearing Monday with the Parliament’s Standing Committee on International Trade. “We remind our American partners of that fact when we enter into this conversation.”

U.S. dairy producers have long complained about being limited in Canada’s market because of a system that restricts imports and caps supply as a way to stabilize income for the country’s dairy and poultry farmers.

Freeland also said Canada would continue to point out that the balance of U.S.-Canada dairy trade already favors U.S. producers south of the border by a margin of 5-to-1. “I would call that already a pretty good deal,” she said.

U.S. dairy producers strike back: Freeland’s comments struck a chord among U.S. milk producers who called her dismissal of U.S. supply management complaints “completely misleading.”

“For too long, Canada has relied on government controls on farm milk production to boost prices, while minimizing dairy imports to limit competition. By comparison, the United States has slashed its government involvement in dairy markets, and relies on exporting its products to global customers to a greater degree than ever before,” National Milk Producers Federation President Jim Mulhern said in a statement.

He also countered Freeland’s assertion that dairy trade is balanced in favor of the U.S.: “Much of what the United States exports to Canada is ultimately shipped back out under Canadian import for re-export programs. Canada has been refusing to share details of imports and exports under those programs, but the reality is that much of the dairy the United States ships to Canada doesn’t stay in Canada.”

CANADA’S COOL OPERATOR: Canada’s chief NAFTA negotiator Steve Verheul was cool as a cucumber as curious Canadian lawmakers pressed him Monday on whether he was ready for what was coming over the next few months.

“We’ve done a lot of research on what the U.S. will be looking for, not just their stated negotiating objectives but well beyond that,” he said. “We have a good sense of what they’re going to bring to the table and what the value of it is. I think we’re certainly well positioned to respond to whatever might come.”

As for handling U.S. negotiators: “The U.S. style is something that we can deal with, we’ve dealt with for many years. We negotiated with the U.S. in various configurations, not just in NAFTA but in other negotiations.”

What to expect: Verheul laid out an incremental process for tackling the negotiations familiar to anyone who has been involved in trade talks.

“Certainly in the first few rounds we’ll be laying the groundwork,” he said. “We’ll be dealing with the easy issues, getting them out of the way and off the table and as you gradually go on you focus in on those most difficult issues that will require some political direction in all likelihood. We do have mechanisms set up so we can get that political direction quickly when we need it to keep pace with the pace of the negotiations.”

On timing, Verheul said he couldn’t predict whether the talks could wrap up by early 2018, when U.S. officials have said they hope to end negotiations.

“You never know when you’re going to get stalled, when you’re going to get delayed or when you’re going to make huge breakthroughs that can accelerate the negotiations,” he said.

LUMBER TALKS TO OVERLAP WITH NAFTA: Negotiations for a new U.S.-Canada softwood lumber agreement will have to exist side-by-side with NAFTA talks for a time, Freeland told Canadian lawmakers Monday.

“At the moment the softwood lumber negotiations will continue in parallel with the NAFTA negotiations as has historically been the case,” she said during a hearing of the Parliament’s international trade committee.

Trump administration trade officials as recently as last week had been hopeful that a deal could be reached before the start of NAFTA talks on Wednesday. The U.S. and Canada are wrangling over an acceptable market share at which to cap Canadian imports into the U.S. The two countries agreed last year that any new deal would limit Canadian imports at or below an agreed-upon market share. U.S. lumber producers are demanding a “clean quota” that prevents any additional lumber from crossing the border.

A deal managing lumber imports would most likely suspend a trade case filed last year by U.S. lumber producers that accuse Canadian companies of being unfairly subsidized through favorable pricing for access to public stands of timber, from which most lumber is sourced. Lumber from Canada is subject to U.S. anti-dumping and countervailing duties of up to 30 percent for some Canadian companies. A final determination on the anti-dumping duties is expected by Sept. 7 and a final injury determination in the case is scheduled for mid-October.

AG COLLEGES JUMP ON NAFTA TRAIN: More than 50 agriculture college deans and other leading ag academics are urging the Trump administration to ensure that any changes to NAFTA don’t curb the robust agricultural exports that have been the fruit of the early 90s deal. “We also urge our trade negotiators to seek opportunities to expand such trade in your upcoming discussions with representatives from Canada and Mexico,” the academics wrote in a letter Monday to Commerce Secretary Wilbur Ross, Agriculture Secretary Sonny Perdue, U.S. Trade Representative Robert Lighthizer, and USTR Chief Negotiator John Melle. Read that here.

SOLAR FLARE-UPS? Witnesses at a public hearing held by the International Trade Commission this morning will offer their perspectives on whether the Trump administration should slap tariffs on solar imports in a case with massive implications for the thriving U.S. industry. Two troubled manufacturers of solar panel components — Suniva Inc. and SolarWorld Americas — want the commission to declare that cheap foreign imports from Asia have caused “serious injury” to their domestic business. The companies want the U.S. to impose duties on imported equipment to revive domestic manufacturing facilities — moves they claim would create thousands of jobs across the industry. “Despite herculean efforts to compete against this onslaught, the imports, which are directly competitive with domestic product, have ground the domestic industry down to a mere shell of its former self,” Suniva argued in its pre-hearing brief.

Opponents of the petitions argue the two companies’ woes stem from bad business calls and that increasing the price of imports would be bad for the industry as a whole, destroying jobs at companies that install solar panels on rooftops or develop utility-scale projects. “This is not a case in which the facts support the findings necessary to justify imposition of any relief,” the Solar Energy Industry Association and SunPower Corp. wrote in their own brief. Other opponents of the petitions include utilities, union officials, bipartisan groups of senators and House members, venture capital groups and conservative organizations like ALEC and The Heritage Foundation, among others. State elected officials from Minnesota, North Carolina, Georgia, Maryland and Virginia, as well as trade officials from South Carolina, Indonesia, the European Union, Brazil Mexico, Canada and Taiwan are all expected to testify as well.

PROGRESSIVE GROUPS WANT AN OPEN DOOR IN NAFTA TALKS: Labor and environmental groups are warning the Trump administration that a NAFTA 2.0 that looks too much like the Trans-Pacific Partnership will likely end the same way that trade deal did – unsuccessfully. And winning their support will start, they warn, at the very beginning: with a process that they argue should be open, transparent, and heavily influenced by input from stakeholders.

"We've seen how corporations hijack negotiations when they're closed-door negotiations, when they're backroom deals," Ben Beachy, director of the Sierra Club's Responsible Trade Program, told Morning Trade on Monday. "We believe that the American people deserve to know what is being negotiated in their name and deserve to have input on the remaking of a deal that has impacted their jobs and wages, their air, their water, their health.”

The administration has so far sat down for meetings with interested parties and accepted recommendations of what policies to pursue. The AFL-CIO, for example, submitted a nearly 50-page document outlining its top priorities, including the elimination of the investor-state dispute settlement provision and tightening labor and environmental standards, said Celeste Drake, the group’s trade policy specialist.

The outstanding worry, however, is that “access doesn't necessarily equal influence," she said. Read more from Beachy and Drake here.

SURVEY SAYS: DEMOCRATS WARMING TO NAFTA: As the administration gears up for NAFTA talks later this week, a new survey released Monday shows that a record number of Americans are saying that international trade is good for the economy and helps create jobs in the United States. That’s fueled largely by a dramatic rise in support for trade deals from Democrats: 41 percent said they supported NAFTA nearly a decade ago, in 2008, while 71 percent say so now, according to the study released by the Chicago Council on Global Affairs.

On the other side of the aisle, Republican support for the detail has shifted slightly in the other direction. Forty-three percent of GOP voters surveyed said in 2008 that they supported NAFTA — a larger percentage than Democrats — while only 34 percent say so now. Overall, 53 percent of the 2,020 respondents said they supported the deal, compared with 42 percent nine years ago.

In what could be a sign of Trump’s trade rhetoric rubbing off on his voting base, the survey shows a growing partisan divide over whether Mexico is practicing fair trade policies in its interactions with the United States. Just over 1 in 4 of Republicans — or 28 percent — responded that Mexico trades fairly, the lowest level since the council began administering the survey in 2002. In contrast, Democrats’ view of Mexico’s trade policy is improving, with 60 percent saying Mexico practices fair trade, up from a low of 42 percent in 2006.

INTERNATIONAL OVERNIGHT

— Oklahoma Sen. James Lankford argues that there is nothing to fear from the trade deficit.

— Intel CEO Brian Krzanich is the latest executive to leave the president’s manufacturing council over Trump’s handling of white supremacist violence in Virginia, CNBC reports.

** A message from ACTION for Trade: America’s dominant position in innovative and creative industries provides an opportunity for U.S. negotiators to ensure that the global economy rewards innovation and protects creative assets. The new American Creative, Technology, and Innovative Organizations Network for Trade is dedicated to shaping U.S. trade policy and trade agreements, making sure they foster innovation and creativity and protect the intellectual property that drives U.S. trade competitiveness. Learn more: http://actionfortrade.org/ **

About The Author

Adam Behsudi is a trade reporter for POLITICO Pro.

Prior to joining POLITICO, he covered international trade policy for Inside U.S. Trade, where he tracked down the latest news on the Trans-Pacific Partnership from exotic locales such as Auckland, New Zealand; Kota Kinabalu, Malaysia; and Leesburg, Va.

Before writing about anti-dumping, export controls and other trade subjects, Behsudi covered city hall for the Frederick News-Post. He got his start in journalism chasing crooked sheriffs and other crime-related news in the mountains of western North Carolina for the Asheville Citizen-Times.

Behsudi earned his bachelor’s degree in 2005 from the University of Missouri. With the hope that journalism could return as a growth industry within his lifetime, he earned a master’s degree in interactive journalism from American University in 2010.